Hi,
I am facing the similar problem of collinearity among independent variables but my model contain all month dummies against 1 continuous dependent variable that is firm's return.
Kindly suggest me how to resolve it.
Here is my output
. regress m1 m2 m3 m4 m5 m6 m7 m8 m9 m10 m11 if day>1&day<5
note: m2 omitted because of collinearity
Source SS df MS Number of obs = 25
F(9, 15) = 1.27
Model 1.14 9 .126666667 Prob > F = 0.3294
Residual 1.5 15 .1 R-squared = 0.4318
Adj R-squared = 0.0909
Total 2.64 24 .11 Root MSE = .31623
m1 Coef. Std. Err. t P>t [95% Conf. Interval]
m2 0 (omitted)
m3 -.5 .2236068 -2.24 0.041 -.9766066 -.0233934
m4 -.5 .341565 -1.46 0.164 -1.228029 .2280286
m5 -.5 .2236068 -2.24 0.041 -.9766066 -.0233934
m6 -.5 .2236068 -2.24 0.041 -.9766066 -.0233934
m7 -.5 .2581989 -1.94 0.072 -1.050338 .0503379
m8 -.5 .341565 -1.46 0.164 -1.228029 .2280286
m9 -.5 .2581989 -1.94 0.072 -1.050338 .0503379
m10 -.5 .341565 -1.46 0.164 -1.228029 .2280286
m11 -.5 .2236068 -2.24 0.041 -.9766066 -.0233934
_cons .5 .1290994 3.87 0.002 .224831 .775169